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Entry Blockading Locations

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  • Boyer, Marcel
  • Mahenc, Philippe
  • Moreaux, Michel

Abstract

How does asymmetric information (regarding production costs) in a spatial market alter the behavior of the incumbent firm which can credibly commit to her location choice? Although entry deterrence is irrelevant here, our analysis shows that entry blockading behavior emerges not only as the result of the incumbent's technological advantage but also as the result of the entrant's beliefs concerning this technological advantage. Using the concept of K-undefeated equilibrium, we characterize the unique location equilibrium for different values of the fixed and variable costs and we show that the conjecture formed by the entrant regarding the incumbent's location strategy does matter for the determination of the equilibrium strategies. First, we show that the market center may be an entry blockading location under incomplete information for a high cost inefficient incumbent who would accommodate entry under complete information. Second, we show that a low cost efficient incumbent who blockades entry at the market center under complete information may be better off to accommodate entry under incomplete information. Comment l'information asymétrique (sur les coûts de production) en concurrence spatiale modifie-t-elle le comportement d'une firme établie capable de s'engager de manière crédible à une localisation donnée? Bien que la dissuasion d'entrer ne soit pas pertinente dans ce contexte, nous montrons que la firme établie peut parfois bloquer l'entrée grâce ou bien à son avantage technologique ou bien aux croyances de l'entrant quant à cet avantage. Nous caractérisons pour différents niveaux de coûts fixes et variables l'unique équilibre K-imbattu. Nous montrons que les croyances de l'entrant sont importantes pour la détermination des stratégies d'équilibre. Ainsi, le centre du marché peut être une localisation bloquante en information incomplète pour une firme établie non-avantagée qui, en information complète, choisirait une localisation accomodante. Par ailleurs, no
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Suggested Citation

  • Boyer, Marcel & Mahenc, Philippe & Moreaux, Michel, 1995. "Entry Blockading Locations," IDEI Working Papers 53, Institut d'Économie Industrielle (IDEI), Toulouse.
    • Handle: RePEc:ide:wpaper:731
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    References listed on IDEAS

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    1. Amigues, Jean-Pierre & Favard, Pascal & Gaudet, Gerard & Moreaux, Michel, 1998. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited," Journal of Economic Theory, Elsevier, vol. 80(1), pages 153-170, May.
    2. Touhami, A. & Martens, A., 1996. "Macroemesures in Computable General Equilibrium Models: a Probabilistic Treatment with an Application to Morocco," Cahiers de recherche 9621, Universite de Montreal, Departement de sciences economiques.

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